Author: Byrne

With every day that goes by, the nation’s employers move a step closer to having to make “play or pay” decisions. Many employers have less than a year to prepare for the arrival of this core provision of the Patient Protection and Affordable Care Act (PPACA). Their decisions are far from easy… the ensuing financial, legal, and competitive implications are profound… and the clock is ticking.

Some employers believe that the play or pay mandate will raise their costs and force them to make workforce cutbacks. As a result, they’re considering the “pay” option—i.e., eliminating their health care coverage altogether and paying the penalty on their full-time employees. Other employers are leaning toward “play,” which means they’ll offer employees medical coverage that meets the requirements of PPACA. While employers should look carefully at both options and do their best to calculate the outcomes of each, the actual solutions implemented by many likely will be creative combinations of approaches (making some reductions to benefits while enhancing others). After all, as with many other workforce-related decisions employers make, their main objective will be to remain financially competitive while still being able to attract and retain the employees they require.

When considering the financial implications of play or pay decisions, keep in mind the fact that PPACA actually calls for two potential penalties for large employers: One penalty for not offering “minimum essential” coverage, and the other penalty for offering coverage that’s considered inadequate because it isn’t “affordable” and/or doesn’t provide “minimum value.” Which employers are considered “large” is different for 2015 and later years.  Under the law, an employer is considered “large” if it has 50 or more full-time or full-time equivalent (FTE) employees in its controlled group.  However, employers with 50 to 99 full-time and full-time equivalent employees in their controlled group will not need to comply until 2016 if they meet certain requirements.

The minimum essential coverage penalty is calculated monthly at the rate of $166.67 for each full-time employee, less  a set number of “free employees.” (Although the penalty is calculated monthly, it will be paid annually.) EXAMPLE: In 2016, Dave’s Donuts does not offer medical coverage to its employees. Dave has 60 full-time employees and 12 part-time employees. Two employees purchase coverage through an exchange. Dave’s Donuts will owe a penalty of $5000.10/month: 60 full-time employees, minus “30 free employees,” multiplied by $166.67 (part-time employees are not counted for purposes of this penalty).

In 2015, employers that owe penalties may subtract 80 “free employees.”  For later years, that number will reduce to 30 “free employees.”

The penalty for not offering affordable minimum coverage is $250 per month ($3,000 per year) for each full-time employee who:

• Is not offered coverage that is considered both minimum value and affordable;
• and purchases coverage through a government exchange;
• and is eligible for a premium tax credit/subsidy (her/his household income must be below 400% of the federal poverty level).

EXAMPLE: In 2016, Jones, Inc. has 55 full-time employees and eight part-time employees. Jones offers coverage that is minimum value, but which is not affordable for 10 of the full-time employees (nine of whom buy coverage through an exchange) and all of the part-time employees (who all buy coverage through an exchange). Seven of the nine full-time employees and six of the eight part-time employees who buy through an exchange qualify for a premium tax credit.

Jones, Inc. owes a penalty on each full-time employee who enrolls in an exchange plan and receives a premium tax credit, so the company owes $1,750 (seven regular full-time employees who receive a premium credit multiplied by $250; the part-time employees are not counted). The first 30 (or 80) employees do count under this “inadequate coverage” penalty. Also, if the “no offer” penalty would be less expensive than the “inadequate coverage” penalty, the employer would pay the “no offer” penalty. the “no offer” penalty.

For a closer look at these penalties and other key issues impacting play or pay decisions, download UBA’s white paper, “The Employer’s Guide to ‘Play or Pay’” http://bit.ly/1chiLEQ. 

Q: I know there are new out-of-pocket maximum rules beginning in 2014. Can you explain them?
A: Beginning with the 2014 plan year, plans may not have an out-of-pocket maximum greater than $6,350 for single coverage and $12,700 for family coverage. The …

Peter Freska, CEBS
Benefits Advisor
The LBL Group, A UBA Partner Firm

Waste in health care has been a discussion for many years. With the passing, and now implementation, of the Patient Protection and Affordable Care Act (PPACA), waste in health care is again at the forefront of health care delivery. According to reports, it is estimated that one-third of all health care spending in the United States is wasteful. The most prominent issue is how to reduce health care costs without compromising the quality of care received. Included in what most determine to be waste are services that are not evidenced to produce better health outcomes. Additionally, inefficiencies in how health care is provided, and costs for treatments, are included in the cycle of waste in health care.

The cost of health care waste in the United States is huge. According to McKinsey Global, the United States spends $650 billion more than other developing countries do on health care (Accounting for the cost of US Health Care – Mcinsey & Company). Generally, it is found that this spending is generated by providers’ capacity for outpatient services, innovations in technology, and demand responding to the increased availability of services. A more current study from 2012 found that up to $750 billion total United States health care spending – including Medicare and Medicaid, state and federal costs – was wasteful spending (The Committee on Energy and Commerce – Memorandum). Wasteful spending included unnecessary services, excessive administrative costs, fraud, and more. The cost of waste is outlined as part of Medicare and Medicaid costs as well as part of the total United States health care spending and at the highest, waste accounts for 37% of total United States health care spending. Working to reduce waste clearly has a compelling argument, at least from a cost savings perspective.

Based on the evidence presented and other studies, wastefulness does contribute to excess cost and at least a reduction in quality. Generally, with this comes a desire to engage in quality and performance improvements. In most situations that have waste, people and organizations tend to strive for more efficiency. Reasonably stated, people do not work out ways to add another unnecessary step to process or treatment. Reasonable people work toward more efficiency and effectiveness. Hence, they work to extract waste from the health care system.

From a quality improvement perspective, people and organizations will focus on processes that work to bring services to the next level. This likely includes the aim of improving the overall health of the community services. From the performance improvement perspective, people and organizations work to achieve strategic goals through improved effectiveness, empowerment, and leaning out the decision making process.

The desire to reduce waste is compelling to engage in these improvement strategies. The Centers for Disease Control and Prevention (CDC) have even dedicated a portion of their website to these topics (CDC – Performance Management and Quality Improvement). Waste in the health care system from failures of care delivery, coordination of care, overtreatment and administrative complexities, pricing issues, fraud, and abuse amounts to billions of dollars annually that could be saved or redirected to better causes. Ultimately, if the United States health care system is to increase performance and quality, then change is needed.

On January 9, 2014, the Department of Health and Human Services (HHS), the Department of Labor (DOL) and the Department of the Treasury/IRS issued Frequently Asked Questions – Part XVIII that provides additional information about requirements in several areas. In this third of a three-part series, we will address some clarifications related to wellness programs.

Wellness programs that have an outcomes-based standard, such as a requirement that the employee achieve a certain body mass index (BMI) or certain blood pressure, glucose, or cholesterol levels, must automatically provide a reasonable alternative. The reasonable alternative may be another outcomes-based standard (with certain additional requirements) or an alternative activity. If the employee satisfies the reasonable alternative, the employee is entitled to the full incentive.

The wellness program regulations also state that the recommendation of the employee’s physician regarding a reasonable alternative must be considered. This raised questions about whether the employer had to completely accept all details of a physician’s recommendation, particularly since the employer generally must pay the cost of a reasonable alternative. The FAQ  says that if an employee’s doctor states that an outcomes-based reasonable alternative is medically inappropriate for the employee, and the doctor suggests an activity-based alternative instead, the employer must accept the suggested alternative, but has leeway on how the alternative is implemented. For example, Rachel exceeds the plan’s body mass index (BMI) standard, and the plan’s usual reasonable alternative is a percentage reduction in BMI. If Rachel’s doctor advises that the reduction in BMI is medically inappropriate and suggests a weight reduction program instead, the plan must accommodate the weight loss program request, but it does have a say in which weight loss program Rachel must complete.

The FAQ also states that a plan that offers an annual opportunity to receive an incentive for non-use of tobacco is not required to offer a mid-year opportunity for an individual who was offered, but declined, the original opportunity. For example, as part of fall open enrollment, Jones Co. offers a non-smoker discount and an opportunity for smokers to enroll in a smoking cessation program for the next calendar year. Mary and John are both smokers. They decline to enroll in the smoking cessation program. John quits smoking in July and Mary asks to enroll in the non-smoker program in August. Jones Co. is not required to give John the non-smoker rate for the rest of the year (although it may if it wishes, on either a full or pro-rata basis). Jones Co. does not need to offer the non-smoker program, or the discount, to Mary (although it may if it wishes, on either a full or pro-rata basis).

To help employers understand all the wellness requirements under PPACA, UBA offers “Frequently Asked Questions about Wellness Program’s Legal Requirements”. To see what kind of wellness programs employers are implementing, download the UBA Health Plan Survey Executive Summary.

On January 9, 2014, the Department of Health and Human Services (HHS), the Department of Labor (DOL) and the Department of the Treasury/IRS issued Frequently Asked Questions – Part XVIII. This document provides additional information about requirements in several areas. In this second of a three-part series, we will break down the details related to out-of-pocket limits.

The FAQ clarifies that, for non-grandfathered plans, the out-of-pocket maximum:

• Must include deductibles, coinsurance and copayments for essential health benefits (EHBs). A plan may exclude benefits that are not EHBs from the out-of-pocket maximum if it wishes.
• Need not include premiums, costs for non-covered services, or costs for out-of-network services in the out-of-pocket limit, although it may if it wishes.
• May be separated into different out-of-pocket maximums for different categories of services, but the total of all the separate out-of-pocket maximums cannot exceed the out-of-pocket maximum allowed by the Patient Protection and Affordable Care Act (PPACA), which is $6,350 for self-only coverage or $12,700 for family coverage for 2014.

-This option may be helpful for plans with multiple vendors.

-This technique may not be used to create a separate out-of-pocket maximum for mental health services because that would violate the Mental Health Parity Act (MHPA).

The FAQ also verifies that, to the extent a large group insured plan or a self-funded plan must consider EHBs, it may use any state’s EHB benchmark plan. A list of the state EHB benchmark plans for 2014 and 2015 is available from the Centers for Medicare & Medicaid Services. (Large group insured plans and self-funded plans do not have to offer coverage for the 10 EHBs, but they cannot impose lifetime or annual dollar limits on EHBs. It will be difficult for these plans to meet minimum value standards unless most EHBs are covered, however.)

For more information about compliance with health care reform, download “The Employer’s Guide to ‘Play or Pay'” which covers PPACA penalties, and how to make “Play or Pay” decisions taking into account factors such as location, compensation, subsidies, Medicaid, family size and income.

The team we have here at Byrne, Byrne and Company is our greatest asset to both our company and the clients we serve daily. The Employee Spotlight is to help our clients get to know the staff they work so closely with and rely on personally and professionally! Read below to learn more about Elena … Continued

If you are a mid-size employer (50-5,000 employees), you are likely considering a private exchange to affordably handle your benefits complexity (eligibility management, payroll deduction, billing and reconciliation, enrollment and claims issues, defined contribution automation, etc.) while reaping the benefits of cost certainty from a defined contribution model. Indeed, beyond the many advantages of private exchanges, they are particularly appealing to those who can’t afford high reliability organization (HRO), human resource information services (HRIS), Benefits Administration outsourcing and other similar services, since these services are all built in.  However, you may not know about three other advantages of private exchanges

1. “Leakage” control
2. Reduction in “Over Insured Syndrome”
3. Amazon-izing the user experience

“Leakage” is when overpaid premiums and under-deducted payroll deductions sap your bottom line. UBA has found that its private exchange program model has proven to decrease this traditional group insurance phenomenon. In fact, an audit discovered that before moving to the program, which included comprehensive benefit accounting services, one 3,000 life company was losing $50,000 per month in leakage!

UBA Partner Firm Hanna Global also studied their traditional group coverage claimants and found that 60-70% have claims under $1,000 and yet they bought plans that cost and cover a lot more—“Over Insured Syndrome!” Private exchanges more effectively provide decision support and, as a result, 80% of employees are migrating to lower cost plans! In fact, UBA recently weighed in on a CFO article detailing how employees are choosing more appropriate coverage levels on private exchanges.

Health care insurance shopping is the last paper dinosaur — forms to fill out… excel grids showing costs and benefits… a PowerPoint presentation to employees gathered in a conference room. Why is it that way? For the first time, private exchanges allow us to “Amazon-ize” the shopping experience, and employees LOVE it! Finally, HR can offer a “big company experience” without the big company cost!

On March 5, 2014, the Department of the Treasury and the Internal Revenue Service released the final employer-shared responsibility (“play or pay”) reporting rules. The Patient Protection and Affordable Care Act (PPACA) requires reporting in support of…

On January 9, 2014, the Department of Health and Human Services (HHS), the Department of Labor (DOL) and the Department of the Treasury/IRS issued Frequently Asked Questions – Part XVIII. This document provides additional information about requirements…

We’re asking some really interesting questions on the UBA Benefit Opinions Survey. Some of the answers (being compiled from what is shaping up to be the most comprehensive set of employers across all sizes, industries, and geography) are likely to surprise us all. Of particular interest, given the tectonic shifts in health care, the Benefit Opinions Survey is exploring the overall mindset related to an employer’s obligation to provide health care. What is your organizational attitude on the following statements:

• Our organization should provide health care benefits to both our employees and their dependents
• Our organization should provide health care benefits to our employees, but employees should be largely responsible for dependent costs
• Employees should bear the bulk of future health care cost increases
• Our organization should provide health care benefits to retirees age 65 and older
• Good benefits help attract employees
• Good benefits increase employee retention
• Good benefits increase employee productivity
• Good benefits are less important now that health Marketplace coverage is available to employees
• Dependents who have coverage available to them through their own employer should not be on our plan

The answers to these critical questions are sure to shed light on the health care reform and cost-control strategies that will dominate the benefits world in the coming months. To add to this exploration of potentially shifting beliefs and attitudes, we are also asking employers just who should take responsibility for choosing health plans, benefit coverage levels, choosing physicians/hospitals, managing chronic conditions, establishing health care outcome requirements, and controlling costs. Should it be insurers? Employers? Employees? Physicians? Hospitals? Government? And given all the new stakes, employers are asked to give serious thought to what exactly government’s role should be when it comes to:

• State and federally-mandated coverage limits
• Requiring doctors and hospitals to publicly disclose prices
• Requiring insurers to publicly disclose actual discounted prices paid to providers
• Mandating quality reporting from hospitals and physicians
• Allowing U.S. consumers to purchase prescription drugs from foreign countries
• Restricting patent extensions for brand name drugs
• Making Medicare available to retirees age 55 to 64
• Developing a single payer health care system that is paid with taxes

To complete the picture, we are not only asking what the employer’s health care role is or what the government’s role is, but we are also taking a look at employers’ outlook when it comes to health care five years from now.  When employers look into their crystal ball, do they see more cost shifting to employees? Increased high deductible coverage? A surge in managed care plans? Smaller provider networks? Disappearing provider networks? A complete switch to a compensation only system? An end to employer-provided coverage altogether? An increase in voluntary benefits? A complete shift to private insurance exchanges?

The answers to all these questions will be indeed timely—and we encourage all employers to complete the survey before March 10, 2014, in order to get a copy of these landmark national findings.